Working Paper: NBER ID: w28048
Authors: Kerem Coar; Benjamin D. Thomas
Abstract: Motivated by the historically tense geopolitical situation in Southeast Asia, we simulate the potential closure of key maritime waterways in the region to predict the impact on trade and welfare. We generate initial (unobstructed) and counterfactual (rerouted) least-cost maritime paths between trading countries, and use the distances of these routes in a workhorse model of international trade to estimate welfare effects. We find heterogeneous and economically significant reductions in real GDP, and show the magnitude of welfare loss is directly correlated with military spending as a proportion of GDP, suggesting nations may be responding to economic security threats posed by such potential conflicts.
Keywords: No keywords provided
JEL Codes: F14; F5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| closure of maritime routes (F55) | reductions in real GDP (E20) |
| closure of maritime routes (F55) | increased shipping distances (L87) |
| increased shipping distances (L87) | elevated trade costs (F19) |
| elevated trade costs (F19) | economic losses (F69) |
| military spending (H56) | welfare losses (D69) |
| anticipated economic impacts of maritime disruptions (F69) | increased military spending (H56) |